"You Never Go Full-Krugman": Insane Helicopter Money Calls Continue As Trapped Central Banks Face Keynesian Endgame

Tyler Durden's picture


For those who follow the pronouncements of central bankers and the sellside penguin brigade, one thing you might have noticed recently is an increase in the number of very “serious” people who are suddenly calling for so-called “helicopter money.” 


Take Citi for instance, where both the firm’s chief economist Willem Buiter and global head of G10 currency strategy Steven Englander both called for helicopter money in September as apparently, the only way to save the world now is to simply have the government print debt certificates only for the central bank to immediately monetize them. 

Note the enormity of that suggestion: that is just one degree of separation away from suggesting that central banks literally drop cash from the sky. 

("Yes, more of that!!")

On Wednesday, we bring you the latest “helicopter” analysis courtesy of SocGen who apparently fears that the only way to avoid secular stagnation (which, for the uninitiated, is just another complicated-sounding, economist buzzword for the more colloquial “everything grinds to a halt”) is for central bankers to call in the Krugman Kraken and go full-Keynes. 

*  *  *

From SocGen

Hard landing – the long view

The long-term view for case 3 (hard landing / reform) essentially reflects a return to more normal market conditions. Reforms support a quick clean up of the balance sheets and a recovery in productivity, which pushes real yields up. Fears of deflation subside, and that too contributes to a normalisation of bond markets. Yields rise: the secular bond rally is over. There is little value is discussing that here. Instead, we focus on the most extreme scenario (case 4), that sees prolonged economic pain (hard landing, lost decade).

In case 4, the medium- to long-term bond view depends greatly on the policy response, especially in G4. Of course, government debt has risen sharply since the financial crisis; hence there is much less room for fiscal stimulus. Economies where public debt as a percentage of GDP is relatively low, and more generally where levels of non-financial debt is contained (Graph 8), are expected to offer better resilience, and this is generally expected to be reflected in the relative performance of sovereign bond markets. In a hard landing scenario with durable global economic pain, investors tend to focus on the balance sheet risks. Japan has been an exception, i.e. has remained a safe haven despite its enormous government and more generally non-financial debt load (Graph 7). This is, to a large extent, thanks to its exceptionally large and positive Net International Investment Position (NIIP), which tends to support repatriation in crisis time.

Generally, the public debt sustainability issue means that one cannot count on fiscal policy to fix the problem. Market discipline indeed limits the potential for proactive fiscal easing. We see four potential policy directions and they all imply very distinctive scenarios for bonds:

1. Monetary financing. There isn’t much fiscal room, unless central banks accept to finance it. That isn’t possible everywhere, e.g. it is forbidden in the eurozone. In areas where it is possible, central banks might accept to fund new government spending or tax cuts. The US already has had recourse to such a powerful policy mix response, which partly explains its strong economic outperformance, e.g. relative to Europe, since the great recession (a quicker clean-up of the banks also helped).

2. Qualitative easing. Central banks print money, but choose to buy private assets. It remains to be seen whether the transmission mechanism, through the portfolio and credit channels, will be working. By buying private equity and bonds, the central banks facilitate the funding of private entities, but this isn’t necessarily a trigger for them to invest and spend

3. The helicopter. Rather than buying assets, central banks drop money on the street. Or even better, in a more modern and civilised fashion, credit our bank accounts! That, after all, may be more effective than buying assets, and would not imply the same transfer of wealth as previous or current forms of QE. Indeed, ‘helicopter money’ can be seen as permanent QE, where the central bank commits to making the increase in the monetary base permanent. Again, crediting accounts does not guarantee that money will be spent – in contrast to monetary financing where the newly created cash can be used for fiscal spending. And in many cases, such policy would actually imply fiscal policy, as most central banks cannot conduct helicopter money operations on their own.

*  *  *

So again, the thing to realize here is that this has moved well beyond the theoretical and it's not entirely clear that most people understand how completely absurd this has become (and this isn't necessarily a specific critique of SocGen by the way, it's just an honest look at what's going on). At the risk of violating every semblance of capital market analysis decorum, allow us to just say that this is pure, unadulterated insanity. There's not even any humor in it anymore.

You cannot simply print a piece of paper, sell it to yourself, and then use the virtual pieces of paper you just printed to buy your piece of paper to stimulate the economy. There's no credibility in that whatsoever, and we don't mean that in the somewhat academic language that everyone is now employing on the way to criticizing the Fed, the ECB, and the BoJ.

There's no sense to the helicopter thesis at all. That is, if the answer to slumping global growth and trade was as simple as me printing one paper liability and funding it with another liability that I also print, then everyone's problems would have been solved a long time ago. In the simplest possible terms: if I can just print paper money and hand it to you and solve not only mine, but your problems, then there are no problems. 

Here's a message to central banks: outright deficit financing is beyond "erroneous" - it simply doesn't make any sense at all. Even if someone believes in the value of the paper you print, you can't just generate one kind of paper on one printer (i.e. Treasurys) and then use the other kind of paper you print (i.e. currency) to buy it and then shower the proceeds on the clueless masses. That's a monetary charade that not even the American public will buy for long.

Put simply, "there were times ... when I was doing Krugman that I actually felt like Krugman, like really Krugman..."

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Wed, 10/07/2015 - 15:33 | 6641121 astoriajoe
astoriajoe's picture

Get to the Choppa! Run!!

Wed, 10/07/2015 - 15:43 | 6641170 Ham-bone
Ham-bone's picture

Since 1990, global population has risen by 2 billion persons*...

However, the growth crushing asterisk is that the 0-5yr/old global population segment (headwaters of true population growth) has risen by a mere +16m since 1990...all of the remaining 1.984 billion of the population "growth" is simply everyone living longer...aging pig through the python. This is why CB's have taken over markets...this is why NIRP is coming.


Wed, 10/07/2015 - 15:48 | 6641197 The Juggernaut
The Juggernaut's picture

Back up that gold truck.  When the institutions are done with whatever it is they give/sell it to the general population.

Wed, 10/07/2015 - 15:53 | 6641234 Syrin
Syrin's picture

I had a Full Krugman floating in the toilet last night after some bad Mexican food

Wed, 10/07/2015 - 16:28 | 6641477 NoDebt
NoDebt's picture

Krugman is the kind of guy who yells "See?  I told you so!" at the turd he leaves in the toilet every morning.

Wed, 10/07/2015 - 16:32 | 6641516 Captain Debtcrash
Captain Debtcrash's picture

The E Dollar makes more sense for TPTB than helicopter money or directly banning cash and negative rates.  Details shown here. 

Wed, 10/07/2015 - 19:10 | 6642211 californiagirl
californiagirl's picture

Krugman is a deadly plague on this planet and needs to be erradicated/neutralized.

Wed, 10/07/2015 - 15:51 | 6641222 LawsofPhysics
LawsofPhysics's picture

NIRP will accelerate the collapse of the current system and the death of fiat!

Bring it!!!

Wed, 10/07/2015 - 16:10 | 6641350 exi1ed0ne
exi1ed0ne's picture

Agreed.  If they are going to add a few 0's to the money anyway, I'd love to be the first in line for a change.  Hopefully the new boat I'd buy with it would hold up better then the last one after I visited the coin shop.

Wed, 10/07/2015 - 18:36 | 6642099 trulz4lulz
trulz4lulz's picture

I want my two dollars! Or in this case, 2 Quadrillion credited units of transactions.

Wed, 10/07/2015 - 15:52 | 6641230 CClarity
CClarity's picture

Are you really going to keep posting this on EVERY article?  C'mon Ham-bone.

Wed, 10/07/2015 - 16:18 | 6641400 teslaberry
teslaberry's picture

who the fuck are these paid troll accounts on zh posting seeking alpha articles? this whole fucking comment boars is infested with paid trolls of various sorts reposting links and reposting nazi anti-semitism and the same shit over and over. is there any intelligent life left on these comment boards?


Wed, 10/07/2015 - 19:38 | 6642296 Not My Real Name
Not My Real Name's picture

Yep. It's gotten way out of hand. The comment section is becoming little more than a pimp-fest for various half-assed blogs. 

Wed, 10/07/2015 - 18:38 | 6642108 PhysicalRealm
PhysicalRealm's picture

This post by Ham-bone has a deceptive link it in.  http://www.seekingalpha.co/ redirects to something called borntosell.c*m . 

Wed, 10/07/2015 - 16:06 | 6641323 sam i am
sam i am's picture


Great idea. I could use 20,000 - 30,000 USD since my

business has collapsed due to the successful economic recovery.

bring it on...

Wed, 10/07/2015 - 19:42 | 6642312 outlaw.guru
outlaw.guru's picture

In the end it all comes down to wealth distribution in late capitalism. This is why I believe that helicopter money is a way out of the problem, as long as it is created by treasury, not Fed. Money injection into the economy of debt free money. Some inflation is a given, actualy even desirable. Debt free cash would resolve the problem of missing money for interest which has been accumulating for some time now. It would undo the QE at least and have some excelent effects on world economy in chains of unpayable USD debt.

However even if done properly, it is only a starting stage for the TALK. The TALK of what the hell went wrong.

Thu, 10/08/2015 - 02:17 | 6643111 AE911Truth
AE911Truth's picture


Here are two things that went wrong:

1.)  300 individuals own more wealth than the 3.5 billion poorest people on the planet. This extreme wealth inequality is the source of most of our ills. These 300 individuals do not work ten million times harder, or more productively than half the people on the planet. They have rigged the system in their favor, and that must change.

2.)  A misanthropic cabal has hidden cheap, clean energy from humanity for more than 100 years. Since the price of energy is embedded in everything from food to housing, this has caused damages in excess of $600 Trillion in addition to unnecessarily polluting our only biosphere.

Put a price on that!

For more details, see SIRIUS The Movie at:


Source: https://www.youtube.com/watch?feature=player_detailpage&v=0gVLv5eg4Xg#t=...

Wed, 10/07/2015 - 15:34 | 6641126 dimwitted economist
dimwitted economist's picture

Do it you stupid Bitches!!!!

Wed, 10/07/2015 - 15:39 | 6641159 de3de8
de3de8's picture

The sooner the better

Wed, 10/07/2015 - 15:48 | 6641207 KnuckleDragger-X
KnuckleDragger-X's picture

300 million people in the USA, just send each one a 1 million dollar check and see what happens. Of course it's the wrong people and not in the trillions, so it'll never happen.....

Wed, 10/07/2015 - 15:36 | 6641135 orangegeek
orangegeek's picture

Helicopter money = rate hike = Fed bullshit.



Wed, 10/07/2015 - 16:03 | 6641141 The Pope
The Pope's picture

Can somebody jus shove a huge Matzoh Ball into that fuckers mouth & create a levered paper market on which nostril the snot will come out of first?

Wed, 10/07/2015 - 15:37 | 6641142 TeamDepends
TeamDepends's picture

"Okay patriotards, you want real money? Here come your helicopter silver coins of death, MUHAHAHAH!!!"

Wed, 10/07/2015 - 15:38 | 6641150 TomJoad
TomJoad's picture

"Lets Roll."

Jump! You Fuckers!

Wed, 10/07/2015 - 15:38 | 6641152 Al Huxley
Al Huxley's picture

I think you have to be some kind of gullible to think the bankers of the world will ever be showering the masses with money.  Much easier just to keep the current system in place and start charging negative interest rates on balances - lets see, I borrow at +5%, but my savings account earns -2%....

Wed, 10/07/2015 - 15:52 | 6641228 Bell's 2 hearted
Bell's 2 hearted's picture



and those proposing such nonsense never seem to mention what would happen to the poor saps working minimun wage when they suddenly got a check for a $5000 or $10,000.


Most would quit their jobs ... leaving business a smoldering crater

Wed, 10/07/2015 - 16:06 | 6641322 exi1ed0ne
exi1ed0ne's picture

A 5K or 10K payday might see your local McD's shortstaffed for about a day, then the employee parking lot would be full of new cars that need to have payments made.

Wed, 10/07/2015 - 17:18 | 6641782 divingengineer
divingengineer's picture

We're probably talking more like $450 Bush Refund amounts.  I've lived to see things I could not have imagined so far, and I think it's about to get really WIERD in the near future. 

Wed, 10/07/2015 - 15:56 | 6641254 LawsofPhysics
LawsofPhysics's picture

Yes.  It will not take people long to realize that a mattress is a safer place for money and assets.  This will only accelerate the death of fiat, fine by me.

Wed, 10/07/2015 - 18:52 | 6642148 Mentaliusanything
Mentaliusanything's picture

If I get no no risk reward for my savings then I have no need to deploy it in a risky gambling bank.

I withdraw all and buy insurance in silver and gold coins or other tangible goods that have a use factor.

A bank cannot function without a bank of savings for flow and margin taking.

Never can happen

Wed, 10/07/2015 - 15:38 | 6641154 slaughterer
slaughterer's picture

Fed will do a rate hike AND chopper money at the same time.   It is the only way. 

Wed, 10/07/2015 - 15:45 | 6641189 WillyGroper
WillyGroper's picture

like the paltry $300 GWB had refunded?

sure to go far.

Wed, 10/07/2015 - 15:55 | 6641248 o r c k
o r c k's picture

It has to be over ten grand or it's a wash.

Wed, 10/07/2015 - 16:19 | 6641405 SillySalesmanQu...
SillySalesmanQuestion's picture

More like 50 to a 100 grand.

Wed, 10/07/2015 - 15:47 | 6641162 brucyy
brucyy's picture


unleash the puking unicorn !


...You get gold in triple digits. You do that.

I double dare you motherfuckers. I really do. I'm waiting.

Wed, 10/07/2015 - 15:40 | 6641166 Slarti Bartfast
Slarti Bartfast's picture

I dunno. The chance to behave like one of the 0.01% before it all explodes might be fun for a while.

Wed, 10/07/2015 - 15:43 | 6641180 Mark Mywords
Mark Mywords's picture

For a day or two, before all of the inflation strikes.

Wed, 10/07/2015 - 15:49 | 6641212 pods
pods's picture

Going to be deflationary. A good percentage of people will use some of this $$ to pay off debt.

Kaboom goes the helicopter money and the debt.

They cannot run the system without balancing both sides or it instantaneously blows. (someone has to borrow that helicopter money to balance the books)

That is why when you get a "loan" there is cancelling debt on the bank's books.

If they were to simply unleash printed raw currency, it would blow up the system.

They always threaten that they can do the helicopter option.  That is for your consumption.  Look behind the curtain and see their money system for what it is.

A sham.  And not a very good one.


Wed, 10/07/2015 - 18:52 | 6642146 NihilistZero
NihilistZero's picture

They did the helicopter option to an extent in 2010.  Home buyer tax credits and the increase in the EIC.

I think they'll go mega EIC next.  Something like 10k plus if you earn under 50k.  If the dollar amount is high enough people will spend after paying off some debt.  A 20k or some other insane number housing DP assistance/credit will follow the popping of Housing Bubble 2.0.

Trump has already spoke of zero income tax for low earners.  I have a feeling they're sewing the seeds for the next helicopter drop already...

Thu, 10/08/2015 - 12:49 | 6644851 Livermore Legend
Livermore Legend's picture

"........simply unleash printed raw currency, it would blow up the system....."

Exactly Right.

Not Going to Happen.

As I have said over the years, Hyperinflation is Politically Impossible in the United States.

Anyone who believes "Monetary Policy" can override "Political Reality" is truly Delusional.

"Deflation" will be the Outcome as it has been repeatedly in the past.


Wed, 10/07/2015 - 15:55 | 6641251 CHX
CHX's picture

...and a close-up "view" of a lamp post up high looms... ?

Wed, 10/07/2015 - 16:06 | 6641325 Herd Redirectio...
Herd Redirection Committee's picture

I am reminded of the Nazi propaganda film made by Stanley Kubrick's wife's uncle, Veit Harlan, named Jud Suss.

"Hang 'em high!"

Wed, 10/07/2015 - 16:16 | 6641378 Herd Redirectio...
Herd Redirection Committee's picture


2:37 mark

Hanging at 4:00 mark.

Wed, 10/07/2015 - 15:42 | 6641177 Mark Mywords
Mark Mywords's picture

Lunacy such as this is why we've made a concerted effort to eliminate all "bad" debt from our lives. While the US dollar is still kinda worth something. We'll be there in a few months.

Wed, 10/07/2015 - 15:45 | 6641194 sudzee
sudzee's picture

Move rates to -5%. The 99%ers can get the money back that was stolen by the 1%. 

Wed, 10/07/2015 - 16:11 | 6641354 cougar_w
cougar_w's picture

How does the bank taking principal out of your savings account at the rate of 5% annually help the 99%-ers? 

Wed, 10/07/2015 - 16:44 | 6641601 r00t61
r00t61's picture

I suppose, under his negative rate scheme, one would be paid to take out loans.  Therefore, if you took out a loan on a house, car, degree, washing machine, etc., you would theoretically make money on the deal.

This assumes of course that the prices of those goods remain static even as rates go negative.

Wed, 10/07/2015 - 17:26 | 6641807 Overfed
Overfed's picture

Negative-rate loans ain't never gonna happen. The only thing negative will be the rate you get on the unsecured loan YOU make to the bank in the form of a deposit.

Wed, 10/07/2015 - 17:32 | 6641834 r00t61
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